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Neutral Sentiment Builds Amidst Market Indecision

Weekly Market Summary

U.S. stocks posted healthy gains this week, boosted by a strong start to the U.S. earnings season. However, promises from President Trump for a “massive tax cut,” perhaps “bigger…than any tax cut ever” did not garner the same response it might have several weeks. The market seems to be looking for action not rhetoric out of Washington D.C. these days, especially in the light of the failed health care reforms. However, there are indications that Republicans are putting together a revised replacement to Obamacare that could be put to a vote in the near future. Investors and traders are also looking across the Atlantic to this weekend’s presidential election in France. Adding to European intrigue, British Prime Minister Theresa May called a snap election for early June in attempts to strengthen public support for Brexit. On the other side of the world, tensions continue to rise between the U.S. and North Korea, with China increasing the readiness of its troops along its border with N. Korea.

The Dow Jones Industrial Average (DJIA) broke its two-week losing streak, adding 0.5% this week to close at 20,547.76. During our break, the blue-chip index fell below its 50-day moving average, removing a key level of support. The Dow has now traded below its 50-day moving average for seven consecutive trading days, the longest such streak since September-October of last year. It does appear that the index has found support around the 20,400 level. Below that is round-number support at 20,000.

The S&P 500 Index (SPX) posted a 0.9% gain this week to close at 2,348.69. Like the Dow, the large-cap index fell below its 50-day moving average two weeks ago and has remained there for the last seven trading days. Having lost this key support level, we now look to the 2,330 level for initial support. Below that is round-number support at 2,300.

This week, eight of the 10 S&P Sector SPDRs posted gains. Industrials (XLI) led the way, adding 2.2%, followed closely by Consumer Discretionary (XLY), which climbed 2.0%. Energy (XLE) dropped 2.2% this week, as oil priced tumbled on doubts that global production cuts will overcome oversupply. For the week, Technology (XLK) gained 1.5%.

The broad market Wilshire 5000 (W5000) rose 1.0% this week to close at 24,519.95. After testing its 50-day moving average several times, the index broke below it two weeks ago. It managed to close back above it on Thursday but dipped back below it to close there on Friday. Having lost this meaningful support level, we now look to the 24,250 level for initial support.

The tech-heavy Nasdaq Composite (COMP) posted a strong week, climbing 1.8% to 5,910.52. Amidst all the recent market turmoil, the index managed to post a new all-time high close on Thursday at 5,916.78 and has seemingly broken the resistance spell of the 5,900 level. Matching its other index peers, the index fell below its 50-day moving average two weeks ago, but only for a day. We continue to look at the 50-day moving average, now at 5,853.16, for initial support. Below that is support between 5,750 and 5,800.

The Russell 2000 (RUT) index of smaller stocks surged 2.6% this week to close at 1,379.85. The index has been moving above and below its 50-day moving average for the last several weeks. On Thursday, the index closed above the moving average, only to fall back below it on Thursday. Since early December, the index has been moving in a trading range between 1,340 and 1,410, with no indication of where the next move will take it.

The CBOE Volatility Index (VIX) fell 8.3% this week to 14.63 after hitting a five-month-high last week.

Computerized Investing Market Dashboard Indicators

This week, one of the CI Market Dashboard Indicators triggered a new neutral signal, shifting from bearish, while another shifted from bullish from neutral. However, none of the Dashboard indicators triggered confirming bearish or bullish signals this week.

To see the current signals of all the dashboard indicators, visit the CI Market Dashboard.

The Market Dashboard is one of the many benefits of Computerized Investing, a service from AAII that harnesses the power of technology to help individual investors become more effective managers of their own portfolios. To learn more about Computerized Investing, visit http://www.aaii.com/computerized-investing/about

 

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